IRS Releases 2012 Whistleblower Report

The Internal Revenue Service has released its Whistleblower Report for FY 2012, which ended on Sept. 30. The report, which is required by Congress, is an annual accounting of the agency’s program that pays rewards to people who turn in tax cheats.

The IRS reported that in FY 2012, it collected $592.5 million from the program, including 12 collections of more than $2 million, and paid 128 awards totaling $125.4 million. As was disclosed in August, the 2012 awards included a $104 million payment to Bradley Birkenfeld, the whistleblower who detailed efforts by Swiss bank UBS to help U.S. taxpayers hide money in Swiss accounts. Although both the recipient and the size of awards are typically secret, Birkenfeld signed a release allowing the IRS to make public his name and the amount of his payment.

Under the law, the IRS has two whistleblower programs. In the small-awards program for cases involving less than $2 million of tax, the award can be as high as 15%, though often it’s less. The large-awards program is more generous: For cases involving $2 million or more of tax, the reward can be as high as 30%. Last year three payments were made under the large-awards program, including Birkenfeld’s.

According to a report and analysis by Erica Brady of the Ferraro Law Firm, the number of whistleblower submissions for 2012 was similar to the number in 2011, as was the number of taxpayers identified by whistleblowers.

Some advocates of the program were dismayed by the following sentence in the new report: “The number of payments made under the [large-awards] program is not projected to grow dramatically in FY 2013.”

Senator Charles Grassley (R, Iowa), a sponsor of the law creating the large-awards program, called the leveling off in the number of whistleblowers “alarming.” In a Jan. 28 letter to IRS officials, he also criticized new regulations for the whistleblower program the IRS proposed in December.